LG Energy Solution faced a severe market shock on December 18, as its stock price plummeted over 8% intraday, wiping out more than KRW 8 trillion (approximately RMB 38 billion) in market value by 2:20 PM local time. The sharp decline followed Ford Motor Company's cancellation of a $6.5 billion (RMB 46 billion) electric vehicle (EV) battery supply contract, equivalent to 37.5% of LG Energy Solution’s total revenue last year. Such a large-scale termination of a long-term supply agreement is rare in the industry, sparking concerns that Ford’s strategic shift could ripple across the broader battery sector.
Ford announced it would halt production of its current F-150 Lightning electric pickup and book a $19.5 billion impairment charge, pivoting investments toward hybrid and extended-range electric vehicles (EREVs). Analysts view this move as one of two critical signals indicating the EV era is entering a phase of heightened uncertainty and competition.
**Contract Termination Details** LG Energy Solution disclosed on December 17 that Ford had terminated a KRW 9.6 trillion EV battery supply deal, citing Ford’s decision to discontinue certain EV models. The contract, originally signed in October 2023, included two agreements: a six-year supply of 75GWh (through 2032) and a five-year supply of 34GWh (starting 2025). Batteries were slated for production at LG’s Wrocław plant in Poland for the European market. The canceled portion, covering 2027–2032, amounted to KRW 9.603 trillion.
**Ford’s Strategic Shift** Ford’s retreat from pure EVs marks a significant blow to LG Energy Solution. The automaker will also exit its U.S. battery joint venture with SK On, a subsidiary of SK Innovation. Sales of the F-150 Lightning totaled just 25,000 units year-to-date, far below its 150,000-unit annual capacity.
CEO Jim Farley stated the company is reallocating capital to higher-return segments, including commercial vehicles, hybrids, and battery storage. However, Ford did not clarify whether its California-based "Skunk Works" R&D center—tasked with developing a $30,000 mid-size electric pickup for 2027—would be affected.
**Broader Industry Implications** Ford’s pivot coincides with the EU softening its 2035 combustion-engine ban, allowing continued sales of some gasoline, diesel, and hybrid vehicles if emissions are offset by renewable fuels or green steel. This aligns Europe’s policy closer to the U.S., where regulatory rollbacks under the Trump administration have slowed EV adoption.
EU Economic Commissioner Valdis Dombrovskis emphasized the need to balance industrial competitiveness with sustainability, stating, “Europe’s auto sector is at a crossroads.” The adjustments aim to ease transition costs while maintaining the region’s manufacturing edge amid global trade tensions.
Comments